NAME OF SUBSCRIBER: The Elite Funding Group, Inc.
To: URBAN COOL NETWORK, INC.
URBAN COOL NETWORK, INC.
SUBSCRIPTION AGREEMENT AND INVESTMENT REPRESENTATION
SECTION 1
1.1 Subscription. The undersigned hereby irrevocably subscribes for
and agrees to lend Urban Cool Network, Inc., a Delaware corporation (the
"Company"), up to $1,000,000 pursuant to the Loan Agreement, as hereinafter
defined, a promissory note executed in connection therewith and shall be issued
one or more common stock purchase warrants (collectively, the "Warrant")
exercisable for an aggregate of 750,000 shares of Common Stock at an exercise
price of $2.00 per share or as adjusted in the Warrant (collectively, the
"Units").
SECTION 2
2.1 Closing
The closing (the "Closing") of the purchase and sale of Units,
following the acceptance by the Company of the undersigned's subscription, as
evidenced by the Company's execution of this Subscription Agreement, shall take
place at the offices of Xxxxxxxxx, Xxxxxxx & Xxxxxxx, P.C., at 000 Xxxx Xxxxxx
Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000 or such other place as is mutually agreed to by
the Company and the undersigned.
SECTION 3.
3.1 Investor Representations and Warranties.
The undersigned hereby acknowledges, represents and warrants to, and
agrees with, the Company and its affiliates as follows:
(a) The undersigned is acquiring the Units for its own account as
principal, not as a nominee or agent, for investment purposes only, and not with
a view to, or for, resale, distribution or fractionalization thereof in whole or
in part and no other person has a direct or indirect beneficial interest in such
Units or any of the components of the Units. Further, the undersigned does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Units for
which the undersigned is subscribing or any of the components of the Units.
(b) The undersigned has full power and authority to enter into this
Agreement, the execution and delivery of this Agreement have been duly
authorized and this Agreement constitutes a valid and legally binding obligation
of the undersigned.
(c) The undersigned acknowledges its understanding that the offering
and sale of the Units is intended to be exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act") by virtue of Section
4(2) of the Securities Act and/or the provisions of Regulation D promulgated
thereunder ("Regulation D"). In furtherance thereof, the undersigned represents
and warrants to and agrees with the Company and its affiliates as follows:
(i) The undersigned realizes that the basis for the exemption
may not be present if, notwithstanding such representations, the
undersigned has in mind merely acquiring Units for a fixed or
determinable period in the future, or for a market rise, or for sale
if the market does not rise. The undersigned does not have any such
intention;
(ii) The undersigned has the financial ability to bear the
economic risk of its investment, has adequate means for providing
for its current needs and personal contingencies and has no need for
liquidity with respect to its investment in the Company; and
(iii) The undersigned has such knowledge and experience in
financial and business matters as to be capable of evaluating the
merits and risks of the prospective investment in the Units. The
undersigned also represents it has not been organized for the
purpose of acquiring the Units.
(d) The information in the Accredited Investor Questionnaire (the
"Accredited Investor Questionnaire") is accurate and true in all respects and
the undersigned is an "accredited investor," as that term is defined in Rule 501
of Regulation D.
(e) The undersigned:
(i) Has been provided an opportunity for a reasonable period
of time prior to the date hereof to obtain additional information
concerning the Company to the extent the Company possesses such
information or can acquire it without unreasonable effort or
expense;
(ii) Has been given the opportunity for a reasonable period of
time prior to the date hereof to ask questions of, and receive
answers from, the Company or its representatives concerning the
terms and conditions of the offering of the Units and other matters
pertaining to this investment;
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(iii) Has not been furnished with any oral representation or
oral information in connection with the Company other than as set
forth in the Loan Agreement between the Company and the undersigned
and the documents executed in connection therewith; and
(iv) Has determined that the Units are a suitable investment
for the undersigned and that at this time the undersigned could bear
a complete loss of such investment.
(f) The undersigned is not relying on the Company, or its affiliates
with respect to economic considerations involved in this investment. The
undersigned is capable of evaluating the merits and risks of an investment in
the Units.
(g) The undersigned represents, warrants and agrees that it will not
sell or otherwise transfer the Units or the components of the Units without
registration under the Securities Act or an exemption therefrom and fully
understands and agrees that it must bear the economic risk of its purchase
because, among other reasons, the Units, the Warrants and the shares of Common
Stock underlying the Warrants have not been registered under the Securities Act
or under the securities laws of any state and, therefore, cannot be resold,
pledged, assigned or otherwise disposed of unless they are subsequently
registered under the Securities Act and under the applicable securities laws of
such states or an exemption from such registration is available. In particular,
the undersigned is aware that the Units and the components of the Units are
"restricted securities," as such term is defined in Rule 144 promulgated under
the Securities Act ("Rule 144"), and they may not be sold pursuant to Rule 144
unless all of the conditions of Rule 144 are met. The undersigned also
understands that, except as otherwise provided herein and in the certificates
for the Warrants and the shares of Common Stock underlying the Warrants, the
Company is under no obligation to register the Units or any of the components of
the Units on its behalf or to assist it in complying with any exemption from
registration under the Securities Act or applicable state securities laws. The
undersigned further understands that sales or transfers of the Units and the
components of the Units are further restricted by state securities laws and the
provisions of this Agreement.
(h) No representations or warranties have been made to the
undersigned by the Company other than those contained in the Loan Agreement by
and between the Company and the undersigned, or any officer, employee, agent,
affiliate or subsidiary of the Company, other than the representations of the
Company contained herein and in the documents executed by the Company in
connection with this Agreement.
(i) Any information which the undersigned has heretofore furnished
to the Company with respect to its financial position and business experience is
correct and complete as of the date of this Agreement and if there should be any
material change in such information it will immediately furnish such revised or
corrected information to the Company.
(j) The undersigned understands and agrees that the certificates for
the Common Stock and Warrants shall bear the following legend until (i) such
securities shall have been registered
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under the Securities Act and effectively been disposed of in accordance with a
registration statement that has been declared effective; or (ii) in the opinion
of counsel for the Company such securities may be sold without registration
under the Securities Act as well as any applicable "Blue Sky" or state
securities laws:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED,
SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i)
PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT WHICH
HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE
SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF
FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE
CORPORATION, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE
CORPORATION, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL
APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY
APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAW."
(k) The undersigned understands that an investment in the Units is a
speculative investment which involves a high degree of risk and the potential
loss of its entire investment.
(l) The undersigned's overall commitment to investments which are
not readily marketable is not disproportionate to the undersigned's net worth,
and an investment in the Units will not cause such overall commitment to become
excessive.
(m) The undersigned represents that neither the undersigned nor any
affiliate of the undersigned within the last 12 months has purchased any
securities pursuant to Section 4(2) under the Act or Regulation D promulgated
thereunder of any company which consummated an initial public offering of its
securities during such period.
(n) The undersigned agrees not to sell the Units or the securities
contained therein to a member of the NASD prior to the consummation of an
initial public offering of the Company's securities.
(o) The foregoing representations, warranties and agreements shall
survive the Closing.
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SECTION 4.
4.1 Piggyback Registration.
If at any time commencing on the date hereof and expiring five (5)
years thereafter, the Company proposes to register any of its securities under
the Securities Act (other than in connection with a transaction contemplated by
Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or
successor forms) it will give written notice by regular mail and by registered
or certified mail, at least thirty (30) days prior to the filing of each such
registration statement, to the holder (the "Holder") of the Warrant and shares
of Common Stock underlying the Warrant underlying the Units of its intention to
do so. Upon the written request of the Holder as represented by Xxxx Xxxxxxxxxx
or Xxxxxx Xxxxxxxxxx given within ten (10) days after receipt of any such notice
of its desire to include any Common Stock in such proposed registration
statement, the Company shall afford the Holder the opportunity to have any such
Common Stock registered under such registration statement.
Notwithstanding the provisions of this Section 4.1, the Company
shall have the right at any time after it shall have given written notice
pursuant to this Section 4.1 (irrespective of whether a written request for
inclusion of any such securities shall have been made) to elect not to file any
such proposed registration statement, or to withdraw the same after the filing
but prior to the effective date thereof.
4.2 Demand and Mandatory Registration.
(a) The Company agrees to register the shares of Common Stock
underlying the Warrant in connection with the registration statement which the
Company files in connection with the Company's initial public offering.
(b) At any time during the five-year period commencing 12 months
after the issuance of the Units, if the Company is subject to the reporting
requirements of Section 13 or Section 15(g) under the Exchange Act of 1934, as
amended (the "Exchange Act"), the Holder as represented by Xxxx Xxxxxxxxxx or
Xxxxxx Xxxxxxxxxx shall have the right (which right is in addition to the
registration rights under Section 4.1 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Securities and
Exchange Commission (the "Commission"), on one occasion, a registration
statement and such other documents, including a prospectus, as may be necessary
in the opinion of both counsel for the Company and counsel for the Underwriter,
if any, and the Holder, in order to comply with the provisions of the Securities
Act, so as to permit a public offering and sale of its Common Stock for
twenty-four (24) consecutive months by the Holder.
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4.3 Covenants of the Company With Respect to Registration.
In connection with any registration under Sections 4.1 or 4.2
hereof, the Company covenants and agrees as follows:
(a) The Company shall use its best efforts to cause any registration
statement to be declared effective at the earliest possible time, and shall
furnish the Holder such number of prospectuses as shall reasonably be requested.
(b) The Company shall pay all costs (excluding transfer taxes, if
any, fees and expenses of Holder's counsel, if any, and any underwriting or
selling commissions), fees and expenses in connection with all registration
statements filed pursuant to Sections 4.1 or 4.2 hereof including, without
limitation, the Company's legal and accounting fees, printing expenses and blue
sky fees and expenses.
(c) The Company will take all necessary action which may be required
in qualifying or registering the Common Stock included in the registration
statement for offering and sale under the securities or blue sky laws of such
states as are requested by the Holder, provided that the Company shall not be
obligated to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(d) The Company shall indemnify the Holder and each person, if any,
who controls the Holder within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), against any and all loss, claim, damage, expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which any of them may become subject
under the Securities Act, the Exchange Act or any other statute, common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained (x) in such registration statement (as
from time to time amended and supplemented), (y) in any post-effective amendment
or amendments or (z) in any application or other document or written
communication (in this Section 4 collectively called an "application") executed
by the Company or based upon written information furnished by the Company filed
in any jurisdiction in order to qualify the Common Stock under the securities
laws thereof or filed with the Securities and Exchange Commission, any state
securities commission or agency, the NASD, NASDAQ or any securities exchange or
the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by the undersigned
expressly for use in such registration statement, any amendment or supplement
thereto or any application, as the case may be. If any action is brought against
the undersigned or any controlling person of the undersigned in respect of which
indemnity may be sought against the Company pursuant to this Section 4, the
undersigned or such controlling person shall within thirty (30) days after the
receipt thereby of a summons or complaint notify the Company in writing of the
institution of such action and the Company shall assume the defense of such
action, including the employment and payment of reasonable fees and expenses of
counsel (reasonably
6
satisfactory to the undersigned or such controlling person) but the failure to
give such notice shall not affect such indemnified person's right to
indemnification hereunder except to the extent that the Company's defense of
such action was materially adversely affected thereby. The undersigned or such
controlling person shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the expense
of the undersigned or such controlling person unless (i) the employment of such
counsel shall have been authorized in writing by the Company in connection with
the defense of such action, (ii) the Company shall not have employed counsel to
have charge of the defense of such action or (iii) such indemnified party or
parties shall have reasonably concluded that there may be defenses available to
it or them which are different from or additional to those available to the
Company (in which case the Company shall not have the right to direct the
defense of such action on behalf of the indemnified party or parties), in any of
which events the fees and expenses of not more than one additional firm of
attorneys for the undersigned and/or such controlling person shall be borne by
the Company. Except as expressly provided above, in the event that the Company
shall not previously have assumed the defense of any such action or claim, the
Company shall not thereafter be liable to the undersigned or such controlling
person in investigating, preparing or defending any such action or claim. The
Company agrees promptly to notify the undersigned of the commencement of any
litigation or proceedings against the Company or any of its officers, directors
or controlling persons in connection with the offering and sale of the Common
Stock or in connection with such registration statement.
(e) The Holder of the Common Stock to be sold pursuant to a
registration statement, and its successors and assigns, shall severally, and not
jointly, indemnify the Company, its officers and directors and each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act, against all loss, claim, damage or
expense or liability (including all expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Securities Act, the Exchange Act or otherwise,
arising from written information furnished by or on behalf of the Holder, or
their successors or assigns, for specific inclusion in such registration
statement.
(f) The Company shall furnish to the Holder and to each underwriter,
if any, a signed counterpart, addressed to the Holder or underwriter, if any, of
(i) an opinion of counsel to the Company, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, an opinion dated the date of the closing under the underwriting
agreement), and (ii) a "cold comfort" letter dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, a letter dated the date of the closing under the underwriting
agreement) signed by the independent public auditors who have issued a report on
the Company's financial statements included in such registration statement, in
each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
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SECTION 5.
5.1 Indemnity. The undersigned agrees to indemnify and hold harmless
the Company, its officers and directors, employees and its affiliates and each
other person, if any, who controls any thereof, against any loss, liability,
claim, damage and expense whatsoever (including, but not limited to, any and all
expenses whatsoever reasonably incurred in investigating, preparing or defending
against any litigation commenced or threatened or any claim whatsoever) arising
out of or based upon any false representation or warranty or breach or failure
by the undersigned to comply with any covenant or agreement made by the
undersigned herein or in any other document furnished by the undersigned to any
of the foregoing in connection with this transaction.
5.2 Modification. Neither this Agreement nor any provisions hereof
shall be modified, discharged or terminated except by an instrument in writing
signed by the party against whom any waiver, change, discharge or termination is
sought.
5.3 Notices. Any notice, demand or other communication which any
party hereto may be required, or may elect, to give to anyone interested
hereunder shall be sufficiently given if (a) deposited, postage prepaid, in a
United States mail letter box, by regular mail and registered or certified mail,
return receipt requested, addressed to such address as may be given herein, or
(b) delivered personally at such address.
5.4 Counterparts. This Agreement may be executed through the use of
separate signature pages or in any number of counterparts, and each of such
counterparts shall, for all purposes, constitute one agreement binding on all
parties, notwithstanding that all parties are not signatories to the same
counterpart.
5.5 Binding Effect. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal representatives and
assigns. If the undersigned is more than one person, the obligation of the
undersigned shall be joint and several and the agreements, representations,
warranties and acknowledgments herein contained shall be deemed to be made by
and be binding upon each such person and its heirs, executors, administrators
and successors.
5.6 Entire Agreement. This Agreement, the Loan Agreement and the
Loan Documents, as defined therein, and the documents referenced herein contain
the entire agreement of the parties and there are no representations, covenants
or other agreements except as stated or referred to herein and therein.
5.7 Assignability. This Agreement is assignable by the undersigned
only in accordance with Section 3.1(g).
5.8 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to conflicts of law principles.
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IN WITNESS WHEREOF, the undersigned has executed this Agreement on
the ___ day of , 1999. ---------------
THE ELITE FUNDING GROUP, INC.
By: /s/ Xxxxxx Xxxxxxxxxx
---------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title:
URBAN COOL NETWORK, INC.
By: /s/ Xxxxx X. Xxxxx, III
---------------------------------
Name: Xxxxx X. Xxxxx, III
Title: Chief Executive Officer
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